Question

Job Costs Using a Plantwide Overhead Rate

Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $270,000, and budgeted direct labor hours were 27,000. The average wage rate for direct labor is expected to be $20 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow:

	Job 39	Job 40	Job 41	Job 42
Beginning balance	$22,700	$32,200	$19,600	$200
Materials requisitioned	18,500	20,800	9,500	12,100
Direct labor cost	9,600	17,900	4,150	3,000

Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 115 percent of cost. (Naranjo had originally developed Job 40 to order for a customer; however, that customer was near bankruptcy and the chance of Naranjo being paid was growing dimmer. Naranjo decided to hold Job 40 in inventory while the customer worked out its financial difficulties. Job 40 is the only job in Finished Goods Inventory.) Jobs 41 and 42 remain unfinished at the end of the month.

Required:

1. Calculate the balance in Work in Process as of June 30.

$

2. Calculate the balance in Finished Goods as of June 30.

$

3. Calculate the cost of goods sold for June.

$

4. Calculate the price charged for Job 39. Round your answer to the nearest cent.

$

5. What if the customer for Job 40 was able to pay for the job by June 30? What would happen to the balance in Finished Goods?

What would happen to the balance of Cost of Goods Sold?

Answer 1

Plant wide overhead rate = 27,000X20/ 270,000 = 200% of direct labor cost

Question		Job 39	Job 40	Job 41	Job 42		Answer
	Beginning balance	22,700	32,200	19,600	200
	Materials	18,500	20,800	9,500	12,100
	Direct labor cost	9,600	17,900	4,150	3,000
	Overhead applied	19,200	35,800	8,300	6,000
	Total	70,000	106,700	41,550	21,300
1	Balance in WIP			41,550	21,300		62,850
2	Balance in Finished goods		106,700				106,700
3	Cost of goods sold	70,000					70,000
5	Balance in Finished goods		0				-
	Balance in cost of goods sold	70,000	106,700				176,700

4

Price charge = 70,000 X 110% = $77000